Vol.:(0123456789) Social Choice and Welfare https://doi.org/10.1007/s00355-021-01344-9 1 3 ORIGINAL PAPER Taxation behind the veil of ignorance Biung‑Ghi Ju 1  · Juan D. Moreno‑Ternero 2 Received: 23 August 2020 / Accepted: 9 June 2021 © The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature 2021 Abstract We explore the design of impartial tax schemes in a simple setup where agents’ incomes are completely determined by their inborn talents. Building on Harsanyi’s veil-of-ignorance approach, we conceptualize an impartial observer who chooses a tax scheme without knowing her own preferences and the distribution of talents, and whose vNM preferences behind the veil obey Harsanyi’s principle of acceptance and are independent, in terms of utility-scale, of the distribution of talents. Our results in the resulting framework provide three main messages: (i) the veil of ignorance implies anonymity of tax schemes; (ii) the veil of ignorance generically rejects utili- tarian tax schemes; (iii) the veil of ignorance endorses the (Rawlsian) leveling tax scheme. 1 Introduction Income tax schemes, when properly designed, are essential tools for the enhance- ment of distributive justice. Our aim in this paper is to design an “impartial” income tax scheme for a group of agents when their incomes are completely determined by their inborn talents, which are “morally arbitrary” (e.g., Rawls 1971). We take Harsanyi’s veil-of-ignorance approach (e.g., Harsanyi 1953, 1955, 1977) to con- ceptualize an impartial viewpoint. An impartial observer, briefy IO, contemplates We dedicate this paper to John Weymark, a great scholar, with our sincere thanks. We acknowledge the contributions from two anonymous referees. Financial support from the National Research Foundation of Korea Grant funded by the Korean Government (NRF-2016S1A3A2924944), the Spanish Ministry of Science and Innovation (ECO2017-83069-P) and from the Center for Distributive Justice at Seoul National University is gratefully acknowledged. * Biung-Ghi Ju bgju@snu.ac.kr Juan D. Moreno-Ternero jdmoreno@upo.es 1 Department of Economics, Seoul National University, Gwanak-ro 1, Gwanak-gu, Seoul 151-746, South Korea 2 Department of Economics, Universidad Pablo de Olavide, Seville, Spain